We've all heard about credit scores and the importance of having a good one. But what is a good credit score exactly? Why does it matter so much? Simply put, it's a three-digit number that symbolizes your financial health. The higher the number, the better your score—and that can open doors for you.
A good credit score gives you access to options like mortgages, rentals, loans, credit cards, and better interest rates. On the flip side, a poor credit score makes it tough to get approved for these opportunities.
For some, especially young adults starting out and those who've overlooked their financial life, understanding how credit scores work might be confusing. If that's you, things change today—in this article, we'll explain what a good credit score is, how it's calculated, and why it matters.
Money matters—but so does happiness. Browse these amazing opportunities on The Muse and find the perfect fit for you »
What is a good credit score?
A credit score is a numerical representation of your ability to repay borrowed money, typically ranging from 300 to 850. It's calculated based on your credit history, which includes factors like loans, credit accounts, debts, and payment history.
So, what's a good credit score? Generally, a good credit score ranges from 669 to 780. The closer you are to the maximum score, the better. But here's the thing: the exact definition can vary depending on the scoring model used. In the U.S., the most recognized credit scoring models are FICO® Score and VantageScore.
FICO® score
The FICO® scores range from 300 to 850 and it has five evaluation categories:
- 800 to 850: Exceptional credit score. Individuals in this tier are considered low-risk borrowers and are highly likely to secure loans and new credit opportunities (such as credit cards).
- 740 to 799: Very good credit score. Individuals in this tier have a positive, above average credit history, and are likely to have an easier time securing credit opportunities.
- 670 to 739: Good credit score. In this tier, individuals are considered low-risk and lenders might still offer them credit.
- 580 to 669: Fair credit score. Individuals in this range may be considered high-risk borrowers and are likely to have difficulty securing credit opportunities.
- 300 to 579: Poor credit score. In this range, individuals are seen as high-risk borrowers and often are denied new loans or credit opportunities.
VantageScore
VantageScore used to range from 501 to 990. However, with the updates in VantageScore 3.0 and 4.0, they now follow the same base as FICO®, ranging from 300 to 850. The difference between them lies in how they categorize each tier.
- 781 to 850: Excellent credit score. In this tier, individuals are considered “prime” borrowers and have an easy time securing credit opportunities.
- 661 to 780: Good credit score. This is the “superprime” tier and individuals are likely to have an easier time obtaining new credit opportunities.
- 601 to 660: Fair credit score. This is the “near prime” tier and individuals might still get credit requests approved.
- 500 to 600: Poor credit score. Individuals in this tier may have a harder time securing new credit opportunities—anything from 500 and below is considered “subprime” by VantageScore's standards.
- 300 to 499: Very poor credit score. Individuals in this tier are considered high-risk borrowers and are less likely to be granted new credit opportunities.
Why is credit score so important?
Lenders, such as credit card issuers and banks, use your credit score to decide if you qualify for loans, credit cards, and other credit opportunities. The lower your score, the more likely they will see you as a high-risk borrower—someone less likely to pay back or pay on time—and deny your application.
Depending on where your credit score falls, whether you're considered high or low-risk, you might still qualify for credit, but with higher interest rates. On the other hand, those with higher credit scores are more likely not only to get approved but also receive better interest rates.
That's why your credit score matters. It can also impact non-lending opportunities, like renting an apartment, since landlords might take it into consideration when analyzing your application.
What factors affect your credit score?
Your credit score is directly influenced by your financial habits. The worse your money management and bill-paying habits, the greater the chances of scoring low points. Here are some key factors that impact your credit score:
- Payment history: Failing to pay your bills on time can lower your credit score. This isn't exclusive to credit cards, but any bill that might be reported to credit bureaus (e.g. phone, rent, utilities, insurance etc.)
- Debt: Accumulating debt, including loans and credit card debt, can negatively impact your credit score—especially if you're unable to pay on time.
- Credit utilization rate: Your credit utilization rate is the percentage of your total credit limit being used at the moment. This rate has a direct impact on your credit score and may lower it if it's too high. (Learn more about it here.)
- Credit applications: If you apply for credit multiple times in a short period of time, it can lower your credit score temporarily. The inquiries accumulate and this behavior is usually labeled as high-risk by credit bureaus.
- Length of credit history: Generally, having a lengthy credit history is good for your credit score—as long as you're able to manage your accounts responsibly.
How to get a good credit score
To raise your credit scores you need to develop discipline and a healthy relationship with your finances. Here are key strategies to build good credit:
- Pay your bills on time: Making timely payments, even if it's a minimum payment, is crucial to raise your credit score. If necessary, set up automatic payments or even alarms on your phone to remember your bills due dates.
- Keep your credit utilization rate low: Avoid using your credit card limit in full, keeping your credit card balance below the limit. The lower your credit utilization rate, the better. If you get to the end of the month with no money, consider creating a budget to track and reduce your expenses. (Here's how to make a budget.)
- Pay off your debts: Like your credit card and other bills, create a debt repayment plan and get rid of any debt you may have. Start with high interest rate debt, like credit cards, then move to the lower rates ones.
- Apply for credit sporadically: You should wait at least six months since your last credit account application before you make a new inquiry.
- Check your credit score regularly: FICO® offers free credit score reports at their website. Check it regularly to ensure there's no missing or incorrect information.
- Keep a lengthy credit history: Being able to manage at least one credit account, with timely payments, for a long period of time can improve your credit score since credit bureaus take the average age of your accounts into account.
FAQs
1. How to know your credit score?
FICO® offers free credit score reports, while VantageScore 3.0 reports are provided by banks and credit card issuers. You can find the list of companies that provide VantageScore reports to its clients at their website.
2. Is 700 an OK credit score?
700 is considered a good credit score by the standards of FICO® score and VantageScore 3.0, which are the most recognized score models in the U.S.. With this credit score you're likely to secure credit opportunities with good interest rates.
3. Is a 900 credit score possible?
The regular FICO® scoring model ranges from 300 to 850, establishing the standard limit for most credit evaluations. However, industry-specific FICO® Scores, tailored for products like auto loans, extend from 250 to 900. You can achieve a higher score in any model with good financial habits—like paying bills on time and managing credit card balances wisely—and maintaining a strong overall credit history.
4. What is a respectable credit score?
The average FICO® credit score in the U.S is 718, according to a report published in 2023. To FICO®, your score is considered to be good if it ranges from 670 to 739, very good if 740 to 799, and exceptional if it ranges from 800 to 850.
5. What is a good credit score to buy a house?
Typically, a good credit score to buy a house is 670 or higher on FICO®, which puts you in the good, very good, and exceptional tiers. However, this can vary depending on the type of mortgage and lender you're dealing with. For instance, FHA home loans require a FICO® score of 580 or higher to qualify for a 3.5% down payment. With a score lower than 580, you'll have to put a 10% down payment if you qualify, which is not guaranteed.
To automatically qualify for a USDA loan, your FICO® credit score should be at least 640. VA loans typically require a 620 FICO® score.
6. What is a good credit score by age?
Your age doesn't impact your credit score. There's no ideal credit score you should have at a certain period of your life. At any age, you should aim to have a credit score of 670 or higher, since this puts you in the “good” tier of both FICO® score and VantageScore 3.0.
